The Obama administration on Friday declared the insurgent Haqqani network a terrorist body, a move that could undermine Afghan peace efforts and test fragile relations between the US and Pakistan.

The secretary of state, Hillary Rodham Clinton, said she had notified Congress of her decision. The notification will ban Americans from doing any business with members of the Pakistan-based militant group and blocks any assets it holds in the US.

In a statement she said: "We also continue our robust campaign of diplomatic, military, and intelligence pressure on the network, demonstrating the US' resolve to degrade the organisation's ability to execute violent attacks."

Enraged by a string of high-profile attacks on American and Nato troops, Congress gave Clinton a Sunday deadline to deliver a report on whether the Haqqanis should be designated and all of the group's members subjected to US financial sanctions.

Clinton's decision comes amid numerous disagreements in the administration about the wisdom of the designation.

The US has already announced sanctions on many Haqqani leaders and is targeting its members militarily.

But the administration had held back from designating the network, a terrorist group linked to al-Qaida, over concerns that that would jeopardise relations between the government and insurgents in Afghanistan, as well as ruffle feathers with Pakistan, the Haqqanis' long-time benefactor.

Washington has branded the Haqqani group as being among the biggest threats to American and allied forces in Afghanistan, and to that country's stability after US troops leave in 2014.

The Haqqani network is allied to the Taliban and based in north Pakistan but crosses the border to fight. It attacks have included the rocket-propelled grenade assault on the US embassy and Nato compound in Kabul in September 2011.

The Obama administration has been trying to coax Afghanistan's fighting groups into peace talks, offering the prospect of a Qatar-based political office for insurgents and transfer of several prisoners being held at the American naval base at Guantánamo Bay, Cuba.

Negotiations have been dormant for months, and the Haqqanis have been among the least interested in talking.

A Pakistani intelligence official said the administration's decision could hurt US-Pakistani relations and affect the peace talks with the Taliban.

The group has also enjoyed a close relationship with Pakistan. The US and its often reluctant counterterrorism ally have been at loggerheads over the Haqqanis for years; Washington has accused Islamabad of giving the network a free hand in the remote North Waziristan region and providing it with logistical support.

Pakistan says its forces are stretched thin in fighting an insurgency that has already killed more than 30,000 people and that it cannot also take on the Haqqanis.

Many analysts attribute this reluctance for confrontation by Pakistan's military to its historical ties to the Haqqani network's founder, Jalaluddin Haqqani, and an assessment that the group could be an important ally in Afghanistan after American forces withdraw from the country in 2014.

Congress wanted action. In July it set a deadline to prod the administration into imposing blanket sanctions on the group by designating it a foreign terrorist organisation.

Clinton's decision will come into effect in seven to 10 days, US officials said.

They said, however, there had been disagreements about the designation. Some favoured it, but others worried that it could elevate the Haqqanis above their status as an amorphous, tribal, movement and harm counterterrorism efforts by increasing members' appeal among would-be jihadists.

Last month, an unmanned drone strike in Pakistan near the Afghan border killed one of Jalaluddin Haqqani's sons – Badruddin, who was considered a vital part of the Haqqani structure.

The US state department said in May 2011 that Badruddin Haqqani was involved with the Miram Shah Shura, a group that controls all Haqqani network activities and coordinates attacks in south-east Afghanistan. The department blamed him for the 2008 kidnapping of the New York Times reporter David Rohde.

Jalaluddin Haqqani created his network while serving as a leader in the decade-long insurgency against the Soviet occupation of Afghanistan, which began in 1979. He developed extensive foreign contacts, getting money, weapons and supplies from Pakistani intelligence, which in turn received billions of dollars from the US and Saudi Arabia.

He served as Afghanistan's justice minister after the Soviets left, and minister of tribal and border affairs after Taliban fundamentalists seized power in 1996. He joined the Taliban insurgency when the US helped overthrow the regime after the terrorist attacks in the US on 11 September 2001.

Haqqani effectively retired in 2005, passing responsibility for day-to-day operations to his son Sirajuddin, who is accused of increasing the network's kidnappings and extortions. Reports also accuse the Haqqanis of lucrative drug trafficking and smuggling.

The US has already designated Haqqani and his sons individually as terrorists.